When it comes to closing the sale, the success rate depends heavily on a customer's ability to pay for the equipment or the service. A perfect sales presentation can be harpooned by a customer's poor credit rating or lack of financing choices. And many contractors and their salespeople lose the time and expense it takes to complete a deal.

When statistics are added up, a lot of potential deals involving lots of dollars can slip away from contractors. According to Mark Berch of Service Financial Co. LLC, Boca Raton, Fla., of the $18 billion per year in replacement systems, 60 percent of them are financed.

"Most dealers offer financing that has been pre-negotiated through their association or trade group. These programs are for ‘A' credit customers only and do not serve very attractive ‘B-D' credits," he said.

In some cases, often involving the "B-D" credit customers, contractors prefer to build in some safeguards prior to closing the deal, e.g., prequalifying a customer or making C.O.D. the "modus operandi." Cash is still king and still the preferred choice. But when a system costs several thousand dollars and the customer's only option is to finance the purchase, what ways do contractors make it easy for them?

The answer is to offer more options. "More financial institutions are providing a broader range of consumer credit and financing options," said Bob Maisel, relationship manager for the HVAC industry, part of GE Consumer Finance's Retail Sales Finance unit, Atlanta.

The NEWS asked some contractors - and finance companies - to share some ways to make consumer financing easier, and less of a burden to the selling process.

"We believe financing is an essential ingredient to closing the sale," said Bob Ring, executive vice president of Meyer & Depew Co., Kenilworth, N.J. "We offer delayed payment/interest financing to help consumers make a ‘buy' decision with our company."

The source of financing can be a sticking point too. A customer may trust conventional means rather than plans being offered by a salesperson. "Like the auto industry, customers like it if the financing information is handled by someone else other than their salesman," said Brad Forgrave of Elliott Heating & Cooling, Sault Ste. Marie, Mich.


Some contractors use their own sources for helping customers secure financing, lenders who they have dealt with in the past. Kevin Nunn, president of Aire Serv Heating and Air Conditioning, Camarillo, Calif., offers options to both his commercial and residential customers.

"We open accounts for light commercial maintenance and repairs," he said. "Customers must fill out a credit application. For new equipment we use leasing companies such as Triumph or manufacturers' financing."

"Residential customers are financed through the manufacturer, i.e., American Standard or Rheem. They usually have no payments until January or six months no payment revolving charge. We can also secure Wells Fargo financing locally."

Ring, an active member of the Air Conditioning Contractors of America (ACCA) added that he offers revolving credit through the ACCA Express (Wells Fargo) program.

Dennis Mollgaard Jr., president of Tiger Services, San Antonio, said his customers enjoy the flexibility of the Citi Financial services his company offers because they enjoy six months same as cash.

"By financing for six months, they have time to cash in stocks or pull money from IRA's without penalties," he said.

Berch listed the common ways for "A" customers to finance a purchase. "Local banks offer closed end retail installment contracts," he said. "Typically, these are not promotional programs and require ‘A' credit. The paperwork is extremely difficult.

"Credit card issuers offer revolving lines of credit which typically entice the customer with ‘one year same as cash' promotions. This also requires ‘A' credit and approval rates vary greatly. But its one signature feature makes it very easy for the contractor."

Maisel added that his company offers contractors numerous flexible financing solutions for their customers including: a range of promotions and seasonal offers; no payments/deferred interest; no payments/no interest for a specific timeframe; fixed payments/deferred interest; reduced APR (annual percentage rates) programs; zero interest fixed equal payments; introductory rates; and Energy Star financing.

"The contractor not only sells the product/project, he usually sells the financing as well," Maisel said. "That's why we equip them with the tools they need. We provide easy credit paperwork, fast response time, and good informational materials. In other words, we help make selling easier."

If a customer is running out of options, the contractor can turn to a business like Service Finance Co. They will take a second look at customers who have been denied financing.

"Fifty percent of the declines are approved by us and the paperwork requiring customer signatures and dates is e-mailed. Time is saved in the home not chasing another financing source and once the loan is approved, the documents are ready for signature," Berch said.

Not having to deal with financing woes and paperwork is a convenience that some contractors turn to. "We prefer not to finance ourselves," said Nunn. "It's too much heartburn."


Despite the many options already discussed, some customers still get a rejection stamp from lenders and credit card companies. But that doesn't mean they are out of options.

"We recommend home equity loans or just doing the repairs and putting it on a credit card," said Mollgaard. "We have been seeing that fewer people are financing. They are writing checks from their credit card account or just writing a check."

Ring agrees with that assessment. "We suggest credit cards, home equity, or purchasing a lesser system," he said. "We see that most clients are approved for a revolving credit line of $10,000. It seems to be either $10k or not approved."

Nunn is one of the fortunate ones who hasn't encountered problems with getting his customers financing. "We have not experienced any turndowns," he said. "But let me clarify that.

"We start with the manufacturer's financing. If the customer does not qualify, then we go to Wells Fargo revolving. If they do not qualify then we go to Wells Fargo secured. So far, we have only two clients who used secured."

Forgrave added that some customers may be turned down because the total amount being financed is too high, but his company has enjoyed a good success rate. "I've never had a person get turned down in five years," he said. "But a couple of times they haven't been approved for the total amount."

Berch stated that rising interest rates and changes in credit card rules could be a headache for contractors and their customers. He noted that there is a fear from credit card issuers that consumers are being overburdened with debt, forcing credit card issuers to tighten their credit standards.

"Recent legislation is requiring credit card issuers to double the minimum payment," Berch said. "This will adversely affect available cash to already debt burdened consumers."

Maisel summed up what HVAC contractors are looking for in a finance company. "Most contractors want a financing partner that is easy to work with, has integrity and stability, knows their industry, and is concerned about their business.

"We can't be successful as a lender if our programs are not user friendly. We have to look at lending from the contractors' perspective and offer credit programs that will generate more sales for them and free them up to concentrate on what they do best - managing the home improvement project."

Publication date: 06/26/2006